Ever since Mao Zedong launched the devastating 1966-1976 Cultural Revolution that wiped out China’s intelligentsia and much of its traditional culture, scholars and China watchers have wondered what the lingering effects of that period would be.

A little over a year into his first term as president, China’s current leader, Xi Jinping, is providing the beginning of an answer.

Mr Xi came of age in that turbulent time and watched as his elite revolutionary family and everything he knew were torn to pieces.

Now it seems it is his turn to wreak havoc on the cozy networks of power and wealth that have established themselves in the era of “socialism with Chinese characteristics”.

In recent weeks, the president’s signature campaign against official corruption appears to have spilled into something more significant and potentially destabilising for the increasingly autocratic regime.

In his efforts to clean house, Mr Xi is targeting a broad swath of individuals, families, factions and societal forces that do not answer directly to him.

The tantalising signs of a full-blown political purge are coming thick and fast, even if they are still mostly hidden between the lines of the country’s tightly controlled state media.

In a typically terse one-line statement late last week, China’s anti-corruption authorities revealed they were investigating a mid-ranking provincial official by the name of Ling Zhengce for “serious crimes and breaches of Communist party discipline”.

There was nothing particularly special about the announcement – except for one thing: Ling Zhengce is the older brother of Ling Jihua, head of the United Front Work Department – a government agency that seeks to influence non-party elite – and a former right-hand man of retired president Hu Jintao.

In the Chinese system, arrests like that are not accidents since everyone in the power structure is acutely aware of where invisible patronage linkages lie.

Mr Ling has been particularly vulnerable since his only son died in a Ferrari crash in 2012 that also badly injured two naked female passengers.

But the assault on the Ling clan, and by extension Mr Hu, is just the latest jab at some of the most powerful ruling families in China, including some who were previously seen as patrons to Mr Xi.

In late March, the Financial Times reported that China’s two living retired paramount leaders, Mr Hu and his immediate predecessor Jiang Zemin, had both warned Mr Xi not to take his anti-corruption campaign too far.

Not only did the campaign have the potential to undermine morale and loyalty within party ranks, some retired elders and their families were getting nervous they could become targets themselves.

But in the months since, Mr Xi has only ramped up his onslaught.

Former internal security chief Zhou Yongkang, officially the ninth most powerful man in China until late 2012, has been in detention since late last year.

An investigation into power sector corruption has been interpreted as a direct attack on the family and network of former premier Li Peng, the man known to many as the “Butcher of Beijing” for his role in the 1989 Tiananmen Square massacre.

The son of former anti-corruption boss He Guoqiang, previously the eighth most powerful man in China, and at least one of his close business associates have been detained on corruption charges.

The Chinese military is also in turmoil as several top-ranking generals from the previous administration have been charged with corruption and selling officer ranks.

The official line is that Mr Xi is serious about tackling corruption and blind to where he might find it.

But in Beijing’s political circles, many are muttering about the vindictive nature of this purge and the autocratic turn that has accompanied it.

Mr Xi is targeting a broad swath of individuals, families, factions and societal forces that do not answer directly to him

Journalists, lawyers, non-governmental organisations, activists and other vestiges of civil society have all been subject to greater controls and repression over the past year.

Most telling have been the harsh prison sentences handed down to transparency advocates for their peaceful anti-corruption campaigns and calls for party officials to disclose their assets.

The message is clear: the authority to decide who is corrupt and who is not is the exclusive domain of Mr Xi and his closest allies.

As the purge rumbles on, many of the pundits who initially compared Mr Xi to Deng Xiaoping, the architect of market reforms and modern China, are starting to think he may be more like Mao.

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About bambooinnovatorKB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund.
Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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